ERA Daily Research - 31 August

S$1.03b bid bags Jalan Anak Bukit site for Far East Organization, Sino Group

The Business Times, 30 Aug 2021, Mon 10:14 pm   

By Nisha Ramchandani

THE Urban Redevelopment Authority (URA) has awarded a state tender for the 99-year leasehold commercial and residential site at Jalan Anak Bukit to Far East Organization and Sino Group, who jointly submitted the highest bid of around S$1.028 billion among the three shortlisted tenderers.

Based on the maximum gross floor area, this works out to about S$989.4 per square foot (psf).

“Overall, the concept proposal is compelling in its well-considered site planning, design response to tropical climate and integration of the various uses and public spaces,” the URA said of the winning bid.

Located at the junction of Upper Bukit Timah Road and Jalan Jurong Kechil, the 3.22 ha site next to Beauty World MRT station can be developed up to a maximum gross floor area (GFA) of 96,555 square metres (sq m).

The URA said in the release that the proposed mixed-use development will have an integrated transport hub with a bus interchange on the second storey, with civic and commercial spaces across the first three storeys.

Top of Form

Aside from the new Beauty World bus interchange, there will an underground pedestrian link that will connect to Beauty World MRT Station on the Downtown Line.

Marc Boey, executive director (planning and acquisition) at Far East, said: “Our vision is to create a bustling and vibrant urban village nestled within lushly landscaped gardens and spaces. The towers are carefully positioned so that many of the future residents will be able to enjoy panoramic unblocked views of Bukit Timah Nature Reserve.”

Features include about 20,000 sq m of retail, food & beverage and office space in a podium, which will be centred around an 1,800 sq m plaza that can be used to host community and special events. The development will also offer 700 residential units and 150 serviced residences, as well as about 2,000 sq m of community space.

The site was put up for tender under a dual-envelope tender system where bidders submit their concept proposals and tender prices in separate envelopes. Only concept proposals which are shortlisted go on to the second stage, which is based on price.

Launched for sale on June 30, 2020, the site, near Beauty World MRT, was on the confirmed list of the H1 2020 government land sales programme. The tender’s closing date was then extended from the original closing date of March 30 to June 29, 2021.

A total of five bids were received – which was below analysts’ expectations – of which three separate bids were from Far East and Sino Group.

The other bidders included Wing Tai Holdings which teamed up with Mercatus Commercial Trust (which is linked to Mercatus Co-operative) to submit a bid of S$1.011 billion.
Meanwhile, Allgreen Properties partnered with Kerry Properties to submit a bid of S$808.99 million.

Mark Yip, CEO, Huttons Asia, said on Monday the blended land cost is in line with market after accounting for location and market sentiments.

Analysts have said that the Jalan Anak Bukit site would serve as a much-needed catalyst to rejuvenate the Beauty World precinct, with the new commercial development injecting vibrancy and fresh concepts.

As part of the evaluation criteria, the commercial, retail and public spaces have to be well-integrated with existing and proposed transportation nodes to keep it pedestrian-friendly. Meanwhile, the building has to feature lush landscapes, and the public spaces are to be well-designed and user-friendly. The developers and their design teams were also assessed on their relevant track record and workmanship quality.


UOL's Watergardens project sells 60% of units at launch weekend

The Business Times, 30 Aug 2021, Mon 8:02 pm   

By Fiona Lam

THE Watergardens at Canberra moved about 60 per cent of its 448 units - which works out to roughly 268 units - over its launch weekend on Aug 28 and 29.

Prices started from below S$920,000 or S$1,424 per square foot (psf) for the two-bedroom units, below S$1.3 million or S$1,438 psf for the three-bedroom units, and below S$1.8 million or S$1,382 psf for four-bedroom units.

UOL told The Business Times (BT) that the per-square-foot (psf) pricing for “typical units sold” ranged from S$1,400 psf to almost S$1,550 psf.

In a note on Monday, Citi analyst Brandon Lee estimated that the overall selling price at the 99-year leasehold condominium stood at around S$1,450 to S$1,500 psf, within the research team’s expectations and higher than the S$1,100 to S$1,200 psf achieved at nearby projects.

The price range of S$1,450 to S$1,500 psf would translate to a profit-before-tax margin of 14-17 per cent, based on breakeven of S$1,240 psf and revalued net asset value (RNAV) accretion of 0.3-0.4 per cent, according to Citi’s estimates.

However, the sale volume "may have fallen slightly short of selected investors' expectations" following Pasir Ris 8's 85 per cent take-up last month, and given that The Watergardens is only the second major non-executive condominium mass-market project to be launched this year, Mr Lee added.

Located in the Sembawang/Yishun area, The Watergardens is the first private residential development in the northern part of Singapore to come to the market in more than six years.

UOL Group chief investment and asset officer Jesline Goh said in a statement that the buyers at the launch weekend were mostly homeowners, and the sales were "well spread across all unit types". More than 85 per cent of the buyers were Singaporeans, the company told BT.

Ms Goh noted: "Based on what we observed, buyers are particularly attracted to the project's strong product attributes, lush greenery, as well as its proximity to Canberra MRT station and the future North Coast Innovation Corridor."

The low-rise project comprises 16 five-storey buildings, and the two to four-bedroom units range in size from 646 square feet (sq ft) to 1,528 sq ft. It is expected to be completed in Q2 2026.

In Citi's view, the launch performance represented "a solid result" for UOL, and is likely to sustain the ongoing residential property upcycle, especially in the mass-market segment.

It may also drive keen competition for three upcoming government land tenders in September, Mr Lee wrote.

The Watergardens is developed by a 50:30:20 joint venture among UOL, its 50.1 per cent-owned unit Singapore Land Group, and Kheng Leong Company.

Nearby, The Commodore by JBE Holdings, slated to launch later this year and housing about 219 units, should benefit from spillover positive sentiment from The Watergardens, Mr Lee added.

UOL reopened The Watergardens' showflat on Aug 14, after it was closed from July 21 in view of Singapore's return to Phase 2 (Heightened Alert).

Back in July, ERA head of research and consultancy Nicholas Mak told BT there was pent-up demand among HDB upgraders for affordable private housing.

Citi's Mr Lee on Monday noted that he foresees The Watergardens' sales performance to have a slight positive impact on UOL's share price. However, the research team continues to view City Developments Limited (CDL) as "a cheaper residential proxy given its deeper RNAV discount of 53 per cent versus UOL's 41 per cent".

Mr Lee recommended "buy" on UOL shares with a target price of S$8.87.

At Monday’s close, UOL rose 1 per cent or S$0.07 to S$7.08. Shares of Singapore Land Group, formerly known as UIC, finished 0.8 per cent or S$0.02 higher at S$2.69.


Executive condos: a winning proposition?

The Business Times, 31 Aug 2021, Tue 5:50 am     

By Leslie Yee

IT TOOK a then-record top bid of S$603 per square foot per plot ratio (psf ppr) for an executive condominium (EC) site in Tengah for the tie-up between City Developments and MCL Land to be awarded the site in early June.

The winning bid of S$400 million edged out the next highest bid by a hair's breadth, of just 0.03 per cent.

When the tender closed for the EC site in Tampines Street 62 last month, a new record price for EC land was set. A consortium comprising a Qingjian Realty and Octava Pte Ltd joint venture, and Santarli Realty clinched the site with the top bid of S$422 million or S$659 psf ppr, which was 1.4 per cent higher than the next highest bid.

Some 414 units or nearly 60 per cent of the 700-unit EC project Parc Central Residences were sold at an average price of S$1,177 psf on the first day of its launch in January.

As of July, new EC projects such as Parc Central Residences and Piermont Grand have sold over 90 per cent of their units. Real estate agency Huttons estimates that there are about 300 unsold units from launched EC projects as at Aug 23 this year.

The appetite from developers and buyers for ECs, which were introduced in the later part of the 1990s, appears strong.

The EC is a hybrid of public and private housing. Built and sold by private developers, ECs offer features of condominiums. A typical EC sits within a gated compound with security, and has amenities such as swimming pools, clubhouses, gyms and playgrounds.

The new EC project, Parc Greenwich, which is located near Seletar Hills, boasts two clubhouses. It will have 52 wellness and lifestyle facilities spread across eight recreational zones.

However, buyers of EC units are subject to certain regulations that apply to HDB flats. For example, couples need to comprise two citizens or a citizen and a permanent resident to be eligible to buy a new EC unit. The monthly household income of buyers must not exceed S$16,000. Subject to certain conditions, buyers of new EC units can get CPF housing grants.

For new ECs, there is a minimum occupancy period of five years applicable from project completion, during which the EC unit cannot be sold or rented out whole. After five years, the said EC unit can be sold to citizens or permanent residents, or rented out whole. After 10 years, the EC unit can be sold to any one including foreigners.

The draw of ECs probably lies in their more affordable pricing relative to condos. A new EC unit is priced at around 20 per cent below that of a comparable new condo unit.

In Tampines, the median prices of units sold last month at condo project Treasure at Tampines and Parc Central Residences were S$1,381 psf and S$1,168 psf respectively.

While a buyer of a new EC unit has to hold the unit for at least five years, this need not be onerous as buying property is a long-term investment. For buyers of private homes, the Seller's Stamp Duty applies if units are sold within three years of the date of purchase.

If private home prices rise and a buyer has patience, buying a new EC unit is a winning proposition. One gets into the private residential property market at a more affordable rate and may get some CPF housing grants.

Healthy profits

After five years of occupation, one can sell the EC unit to a slightly restricted pool of buyers. One can also rent out the entire EC unit, with tenants likely to be indifferent between renting an EC or a condo unit. After 10 years, resale restrictions lift and one's EC unit becomes essentially the same as a condo unit.

Owners of earlier EC projects, who bought at the time of launch, sit on healthy profits. Units of The Floravale at Jurong West fetched a median price of S$695 psf based on resale transactions in Q2 2021.

Transacted prices in Q2 2021 are nearly double the prices when this EC was first launched for sale in Q2 1999, broadly in line with the performance of the price index of private non-landed homes tracked by the Urban Redevelopment Authority (URA).

Whether a buyer in a particular EC project makes a larger gain relative to the price performance of non-landed private homes in general can depend on factors such as location and quality of development.

At Bishan Loft, many initial buyers of the EC units in Q3 2001 paid around S$400-S$450 psf. Units in this development have been transacted at over S$1,100 psf this year. The gains of initial buyers in this EC would likely exceed the over 80 per cent rise in URA's price index of private non-landed homes between Q3 2001 and Q2 2021.

As ECs sit on leasehold land, some may worry about land lease decay as ECs age. However, older ECs can possibly explore collective sales just like old leasehold condos.

Tough luck and BTOs

Perhaps buyers who are eligible to buy HDB Build-To-Order (BTO) flats would be weighing the choice of getting a new EC unit instead.

Naturally, buyers note that a HDB BTO flat costs much less. By buying a HDB BTO flat, one saves on financing costs, frees up funds to earn returns from investments, and accumulates savings to help fund the future purchase of a condo unit. If luck shines, one may snare a desirable HDB BTO unit, thereby getting a good place to call home and a chance to make substantial capital gains.

The trouble is, one may not succeed in these times in balloting for a HDB BTO unit of one's liking.

In this month's BTO exercise, the 459 four-room flats offered in Hougang attracted 11,400 applicants, with more than 18 first-time applicants per four-room unit.

However, buying a new condo unit may be out of reach for some amid rising private new home prices, particularly in the Outside Central Region, where absolute sums involved are generally lower.

HDB resale prices are also rising, with more resale units being transacted for over a million dollars each.

So for those who fear that private home prices will gallop away, getting into the private home market via the EC route as soon as possible can make sense.

Conversely, a buyer of a new EC unit will be caught wrong-footed if private home prices fall due to cooling measures introduced by the government or economic weakness.

As of Q2 2021, there are around 34,084 EC units compared with 306,199 units of condos and apartments. The supply of uncompleted EC units in the pipeline stood at 4,113.

Keen competition is expected for the EC site on the confirmed list of the H2 2021 Government Land Sales Programme at Bukit Batok West Avenue 8, which can yield around 375 units.

Developers, who are hungry for sites, may view EC projects targeting a local market as being relatively low risk.

Bidders for the Bukit Batok EC site are likely to be aggressive as demand for new EC units should be firm amid rising private home prices.

As the economy recovers, gains in the labour market, particularly in one that prioritises the hiring of locals, will support demand for ECs. The prevailing low interest rates will help buyers in financing the purchase of their dream homes.

Are the cards stacked for a strong showing when the 496-unit Parc Greenwich from Frasers Property opens for booking on Sept 11?

As long as many people yearn to own a private home, be it for the chance to enjoy capital gains over time or to fulfil personal aspirations, ECs can offer a viable entry route at a discounted price.

Underpinned by buy-in from developers and purchasers, the uniquely Singaporean concoction called the EC looks to have staying power. Policy-wise, there should be support for ECs as this hybrid helps aspiring young Singaporeans towards owning a private home.


Park Hotel Group loses management contract for Clarke Quay hotel

The Straits Times, 30 Aug 2021, Mon 12:32 pm     

By Grace Leong

Park Hotel Group has lost its management contract for Park Hotel Clarke Quay, the second contract it has lost out of the six hotels it managed here. This comes after the winding up of a firm that used to own the Singapore-based hospitality group.

On Aug 28, landlord Ascendas Hospitality Reit terminated a master lease agreement and took possession of the 336-room hotel because tenant Park Hotel CQ failed to pay $5.92 million in debt by June 30.

Renamed the Riverside Hotel at Clarke Quay, it will be managed by Ascott International Management, a wholly owned unit of CapitaLand, under a short-term management agreement for six months. This agreement may be extended.

When The Straits Times visited the hotel on Monday afternoon (Aug 30), the Park Hotel Clark Quay signage was gone.

A worker who was putting up cordon tape around the hotel, currently a government quarantine facility, said he has not heard of staff cuts or retrenchment. He declined to be named.

Ms Tan Shin Hui, executive director of Park Hotel Group, said in a Linkedin post seen by ST that Aug 27 was the last day of operations for Park Hotel Clarke Quay.

"This was our baby. From conception to birth and eventually maturing into a well-loved and high-performing hotel, we were there every step of the way. Today, we saw it take flight and leave our nest," she said.

Ms Tan added that Park Hotel Group tendered for this site in 2006, built the hotel over 25 months and officially opened it in 2009. The site was sold to Ascendas Hospitality Trust in 2013.

"Unfortunately, life has a way of hitting us with tribulations and curve balls when we least expect it. The worst crisis since World War II struck the hospitality and travel industry in February 2020 and 18 months on, we are still in this pandemic and adjusting," she said.

"Despite best efforts, the hotel's tenant didn't manage to successfully renegotiate pre-pandemic lease terms, which were impossible to sustain... I truly believe the tripartite, that is, landlords, tenants and government, needs to work together in better ways to ensure that the economy, businesses and livelihoods are able to bounce back. There is no winner in this crisis," she added.

Ms Tan is married to Mr Allen Law Ching Hung, who is listed as Park Hotel Management's (PHM) sole shareholder, chief executive and director. He is the former CEO of Park Hotel Group and son of Mr Law Kar Po, who is ranked 15th in Forbes Asia's 2021 list of Hong Kong's 50 richest people.

Last month, the owner of another hotel, Destination Singapore Beach Road, terminated a 15-year hotel management agreement with PHM and took over management of the 300-room hotel at 700 Beach Road.

This followed the winding up of PHM, a firm that until recently owned Park Hotel Group. PHM was wound up on July 2 over a $5.2 million debt owed in relation to another hotel.

PHM is the parent company and guarantor of Park Hotel CQ, the tenant of Ascendas Hospitality Reit. Ascendas Hospitality Reit is owned by Ascott Reit, part of Ascott Residence Trust.

The Reit manager said on June 25 that a notice of intended forfeiture had been issued to Park Hotel CQ over outstanding payments relating to the master lease for Park Hotel Clarke Quay. A letter of demand was issued to Park Hotel CQ to recover sums due on March 1.

Park Hotel Group, a sole proprietorship, had its ownership changed on March 8 this year from PHM to Park Hotel Group Management. The new owner is wholly owned by a British Virgin Islands company called Good Movement Holdings. It has only one director, Ms Tan, who was appointed on March 1.

The dispute in relation to Park Hotel Clarke Quay was brewing when another landlord, New Park Property, in June sought to wind up PHM over $5.2 million of debt owed in relation to the 308-room Grand Park Orchard.

As PHM is now under liquidation, the next step is to work with liquidators to recover the outstanding rent and damages due under the master lease, Ascott said.

Other hotels run by Park Hotel Group here include Grand Park Orchard, Grand Park City Hall, Park Hotel Alexandra and Park Hotel Farrer Park.


Drop me a message

I will get back to you soonest possible!